Australian outward investment case study
 Australian company Michell Group has been in the business of wool for 140 years. Started as a family business in Adelaide, South Australia in 1870, the company found success as a buyer and exporter of Australian wool.
In 1949, with a booming Chinese market, company owner Ron Michell travelled to China to set up a network of local agents. For the next 55 years Michell Group continued to trade wool with China and other parts of the world.
In 2004, the company needed to expand on its Australian processing capacity to meet growing global demand. Peter and David Michell, who were now overseeing the company, followed in their grandfather’s footsteps to China. This time it was to build a US$10 million scouring and carbonising plant at Suzhou in Jiangsu Province.
The company sought the assistance of Austrade during this time. Michell Group’s Chairman, David Michell, said the construction process had its share of challenges. “Working with varying levels of government is challenging enough on home soil, but when you are dealing with foreign governments, the barriers sometimes test the best. Having the support of Austrade was vital in keeping the lines of communication open,” he said.
 The move to China brought the company closer to its main customers, given around 80 per cent of the Australian wool clip is destined for China, the balance split between Europe, Japan and Korea. “Our customers were looking for a just-in-time delivery from stock model,” David Michell said.
Michell Group’s operation in China put the company in a position to deliver small lots to its Chinese customers; and locating the factory close to a port aided efficient logistics. “The lower labor cost (in China) is important and has allowed Michell to extend our product range and add value that was not possible in Australia. But building materials, power and now environmental compliance are similar to other developing countries,” David Michell said.
“We were offered the opportunity for a location close to Shanghai and the regional government was very receptive to our environmental leadership and standards,” he said.
Michell Group had very high environmental standards in Australia and the company was keen to transfer some of the technology and processes developed in this country to their Chinese operation.
The company has set a new standard for water treatment in its field in China and by exceeding the local requirements; Michell Group put pressure on its Chinese competitors to lift their game on environmental issues.
Michell Group’s Managing Director, Peter Michell said, “You need to remember you are a guest in their country, so be culturally aware, understand the rules and behave accordingly. Having Austrade as part of our start-up team in China really helped us negotiate the business rules with the local government,” he said.
Michell Group has steadily grown its footprint in China and company turnover is now around A$100 million. “We are a significant player in the global wool market. Since the establishment of scouring and carbonising, we have added ‘Superwash’ facilities and further diversified our services,” Peter Michell said.
The local production facility has also meant that Michell Group’s Chinese sales force can bring customers thorough the plant to see the wool being processed. “It is key to employ quality people—poor quality people are easy to find but will cost you a lot more in the long run. We found investing in our employees with training and education is very important as labor turnover is higher than Australia,” Peter Michell said.
“Don’t go China thinking you will be a Chinese company, you’re an Aussie company. Australian companies are well received and are known to be flexible, so be prepared to learn,” he said.
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